Senior Staffers Buy and Sell Shares in Companies that Benefit from Legislation some of them Write in their Committees.
A Judiciary Committee Aide to Sen. Dick Durbin (D-IL), Daniel Swanson, dropped somewhere between $4,004 and $60,000 in Mylan Stock from His and His Child’s Portfolios. If an Aide had done the same thing in the Executive Branch, he or she could be Investigated for Violating Federal Conflict-of-Interest Law. But the Durbin Aide’s Ownership of Shares of Mylan, and their timely Sale, are reflective of Congress’ persistent Refusal to Crack Down on Stock Trading by Staffers, even in Firms overseen by their Committees.
Swanson, Family’s Holdings amount to somewhere between a minimum of $99,043 and a maximum of $785,000, based on the price Ranges in his Disclosure Form. Some of those Purchases and Sales were in Mutual Funds, while others were in Companies with significant Business Interests before Durbin and the Judiciary Committee.
Among a variety of Trades made through his and his Family’s Accounts, Swanson Bought and Sold Stock in 2U, a For-Profit Online Education Company that bills itself as an Alternative to the Traditional For-Profit Colleges that have been heavily criticized by his Boss, Durbin. He traded Stock in Comcast and Verizon, both of which have come under Judiciary Committee Scrutiny in the past because of proposed Deals and mergers. And he held and Sold Stock in Express Scripts, a Company that, like Mylan, has increasingly caught the Eye of Regulators and Lawmakers for its possible Role in Drug Overpricing.
When asked about the Trades, Durbin Spokesman Ben Marter provided a Letter from Swanson’s Brokerage Firm that says Trading in Swanson’s Account is Directed by the Firm based on “a mutually agreed upon written statement of your objectives” and that the investment Firm has “full authority” to make Trades without giving Swanson Notice.
But we now need to determine when Swanson made Trades himself.
Durbin himself is among the many House Members and Senators who avoid Buying and Selling Stocks, in many Cases because of the Ethical Ramifications of being Invested in Companies while Voting on and Passing Laws. And he introduced a Bill earlier this year to Force President Trump and Vice President Pence to completely Divest themselves of any Holdings that could present Conflicts of Interest. If Trump dropped such Investments, Durbin said, it would let “the American people know with certainty that he is putting America first.”
Durbin’s Aide, Daniel Swanson, isn’t alone. A Review of Federal Disclosures for 2015 and 2016 found that some Senior Aides regularly Buy and Sell Individual Stocks that present Potential Conflicts of Interest with their Work. A smaller number of Staffers Trade in Companies that Lobby Congress and the Committees that employ them. In all, approximately 450 Aides have bought or Sold a Stock of more than $1,001 in value since May 2015.
That’s likely just the tip of the iceberg, since most Congressional Aides aren’t required to Report their Trades. Only those in positions Earning more than $124,406 per year must Reveal their Investments. Of the 12,500 Staffers working for Lawmakers, Committees, and Leadership Offices, only about 1,700 make that much, according to Data compiled by Legistorm and the Brookings Institution.
Government Watchdogs say that, at a minimum, Staffers should be Prevented from Buying Shares of Companies with Business before their Committees. But they are not. And despite the disparity between the rigorous Standards for the Executive Branch and the laxness of Congress, the House and Senate have taken a Permissive approach even to enforcing Existing Rules.
That’s a serious problem, Watchdogs say, because Aides often have more of a Hands-on Role than the Members themselves in Crafting details of Legislation that could have enormous consequences for Individual Companies. And because Aides are rarely in the Spotlight, there’s more potential for Ethical Lapses to go unnoticed.
“The staff level is actually more dangerous, because they don’t get scrutiny and they’re not accountable,” said Meredith McGehee, Chief of Policy at Issue One, a Watchdog Group for Money and Politics. “If a member does it, he can get defeated. A staff person can wield enormous amounts of power that isn’t seen, and there’s really no way to hold that staff accountable.”
Indeed, one of the Review's key findings is that Senior Aides to both Republican and Democratic House Leaders, who often have quiet, largely unseen input into the Crafting of Legislation, are Active Traders. At least 11 Aides to House Leaders have Bought and Sold multiple Stocks in the past Two Years.
David Hoppe, who was Speaker Paul Ryan’s Chief of Staff in late 2015 and 2016, regularly Traded Stocks. Hoppe and his wife bought Shares of the Oil companies Occidental Petroleum and Devon Energy shortly before Congress announced Plans to Lift a years-old Ban on Oil Exports that Benefited both Corporations.
Diane Dewhirst, Deputy Chief of Staff to House Minority Leader Nancy Pelosi, disclosed her Spouse’s Purchase of Stock in Two Pharmaceutical Companies, Astrazeneca and GlaxoSmithKline, in December 2016, shortly before Congress passed a Medical Research Bill that benefited both Companies.
Meanwhile, on the House Energy and Commerce Committee, which sets Energy Policy and is the main Committee overseeing Obamacare, at least Six Aides have Bought and Sold Stock in Companies with interests in the work of the Committee. One longtime Committee Aide in an Oversight Role Bought and Sold more than Two Dozen Health Care and Energy Stocks during 2015 and 2016 and Sold his Stock in Express Scripts, the Prescription Drug Sales Company, as the Company came under Scrutiny over its Role in setting Drug Prices last October.
On the House and Senate Appropriations Committees, which make broadly influential Spending and Policy Decisions through annual Government Funding Bills, at least 18 House aides and 14 Senate Aides have Bought or Sold at least one Stock, through their Own Accounts or Family Members’. For example, one Senior House Appropriations Aide working for a Member focused on Energy and Water Funding has, through various Family Accounts, Bought and Sold Shares in Companies including Royal Dutch Shell, Energy Transfer Partners, Dow Chemical, and Emerson Electric. Another longtime Aide on the Committee’s Staff who is focused on Investigations and Research, which are at the heart of the Committee’s Decision-making, Holds and Trades Stock in Companies with Major Interests in the Committee’s Work, including Pharmaceutical Companies such as GlaxoSmithKline and Energy Companies such as Occidental Petroleum.
Swanson, Hoppe, and some other Senior Staffers said their Brokers are Authorized to Buy and Sell Stocks without their Involvement, and thus they were not Consulted on the Trades listed in their Disclosure Forms. But Ethics Watchdogs have long frowned on such Personal Deals, noting that they can be Abridged at any time and that Outsiders have no way to Verify that they’re being followed. Aides, like Members themselves, can create Blind Trusts that fully Bar them from Involvement in any Trades. If they don’t want to go to the trouble of setting up a Blind Trust, they could Protect themselves from many potential Conflicts by Investing in Publicly Traded Mutual Funds.
Meanwhile, some Staffers also Defended their Trading on the Grounds that the Congressional Actions that affected the Companies they Bought and Sold, including the Three Senators’ Letter to the Justice Department about Mylan, were known to the Public. Ethics Watchdogs, however, say that it’s often difficult, if not impossible, to determine whether an Aide has Information that wouldn’t be available to the Public, and that any Trading of Stocks that are directly influenced by their Committee Work constitutes a Conflict of Interest.
“It causes the public to question whether personal stock holdings are influencing legislative activity,” said Donna Nagy, an Indiana University Law Professor who has written extensively on the issue. “That doesn’t necessarily mean a ‘yes’ or ‘no’ vote, as it would a senator or member of Congress. Did personal stock holdings influence the speed or slowness with which a report is written? That’s something that would be in staffers’ control.”
Simply having a Financial Stake in an Industry may make a Person more likely to Advocate for it, at least in the eyes of Taxpayers. That’s the Premise behind the far Tougher Requirements for Staffers in the Executive Branch, where Employees are Required by Law to Recuse themselves from any Investments that could potentially Conflict with their Work.
Senate Committee Aides are held to no such Legal Standard. But a little-recognized Senate Rule states that Aides should Divest themselves “of any substantial holdings which may be directly affected by the actions of [their] committee” unless they have Permission from the Senate Ethics Committee.
But the Rule is interpreted quite narrowly, Watchdogs say: The Senate Ethics Committee often Measures a “substantial holding” by the percentage of a Company that’s owned by the Aide, or whether an Individual Investment Constitutes the Bulk of an Aide’s Savings, not the Amount of Money that’s Invested. So most Stock Trades aren’t Covered.
The Ethics Committee rarely Probes Stock Trading by Aides. Ethics Watchdogs couldn’t think of a Single Case of an Aide being Investigated for a Conflict of Interest. The Committee hasn’t issued a Disciplinary Sanction against an Aide for any reason in 10 years. “There does not appear to be an effective system of enforcement in place,” concluded Craig Holman, Lobbyist at the Watchdog group Public Citizen. “This is the type of conflict-of-interest rule that should apply to all members as well as senior staff, enforced by real-time public disclosure or stock trading activity.”
Behind the scenes, Reform Groups have been shopping several Proposals that would prevent Lawmakers, and their Aides, from Engaging in such Behavior. One idea floated by Issue One would Ban Lawmakers from Trading Stocks aside from Mutual Funds. This would ensure Lawmakers have broadly Diversified Portfolios that they do not Control. Public Citizen, meanwhile, would simply apply the much Tougher Conflict-of-Interest Rules that apply to the Executive Branch to Members of Congress and their Aides.
The Groups say they have heard some interest from Lawmakers, but no one has stepped forward to introduce either Bill. Democrats have been focused on Criticizing the Trump White House’s Apparent Ethical Lapses. And Lawmakers haven’t proposed other Plans for Overhauling the Stock Trading System, in part, Ethics Watchdogs say, because they haven’t been sufficiently shamed into doing so by the Public. “The more embarrassing the story that comes out, the more pressure there is to do something,” Noble said. “A lot of members do honestly believe they should not be trading in stock while they’re working in legislation, [but] they may not feel as strongly about it” as the Members who disagree.
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